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Comment by dharma1 | Hacker News Reader

I think the vast majority of coins and tokens are near worthless. People invest in them because other people invest in them, in hopes of seeing returns like early investors in Bitcoin and Ethereum did. There will be a correction at some point.

But that's not to say that a blockchain with functionality aside from store of value (like Ethereum) couldn't pan out and enable a whole new universe of use cases for trade, company formation and ownership, and contracts in general, on a global, super-fast, completely automatable scale. It could be yuge - but since no-one knows what will happen and it's still early days, the current valuation of Ethereum is also highly speculative. If it works out though - maybe the current valuation of Ethereum will look cheap in retrospective.

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I can see the use of blockchains and networks like ethereum, but it seems like the majority of use cases could run on a private network. I still don't see the appeal of a single public network. Why not a dozen or a hundred? That's why the value or Ether seems so useless to me. There was a backlog of transactions lasting hours yesterday and this is supposedly just the beginning.

I think the future may well be lots of blockchains talking to each other via something like Polkadot (http://polkadot.io).

There may also be use cases for private blockchains, and there are startups pursuing those, such as http://chain.com (though I'm not sure why regular databases wouldn't work for most of those use cases), but I think there is also a need for a global decentralised network (or networks) for other use cases - global transactions/contracts, decentralised companies, probably other use cases yet to emerge.

Current scaling/latency issues with blockchains - there is ongoing work to solve those via off-chain networks, sharding etc - it's still early days, it will take some time to develop.

So far, there hasn't been any killer use case for ethereum yet. Everything it does, can be done more efficiently outside of the ethereum network. Some say that its "decentralized" on ethereum though, but this isn't true, because a lot of the inputs to ethereum contracts originate from a centralized source. For instance, if you want to make a smart contract that sends you 100 eth based on the outcome of a basketball game, the centralized source where you get the trigger on who won the game, is the centralized source your contract has to trust. It doesn't really matter whether the contract was executed on the ethereum network, it is still vulnerable to centralization. Whats the difference between that and just making it work on bitcoin by having a service sign a multisig transaction sending you btc if the basketball team wins? The only way something can truly be decentralized, is if all the actions in the smart contract are primitive actions based within the network itself. For instance, if y address receive 1 eth, send x address 2 eth. Neither action requires trust outside the ethereum network.

I think one use-case that makes some sense is Mysterium (https://mysterium.network). VPNs actually have material benefit from decentralization, and the ability to actually cover costs in operating exit nodes is somewhat of a game changer relative to something like TOR (I do realize they have different security profiles, though).

Data storage is also a moderately interesting application. Decentralizing data persistence, and being able to take advantage of the enormous amount of excess hard drive space that exists in the world is an interesting concept. Things in this category are Sia, Storj, and MaidSafe. While i'm not sure the economics and logistics will actually work out, I do think there is something there.

yeah there are speculation bubbles, which correct and if you are trying to profit off of the waves you can get bit... sure this one needs a correction... but so does my 401k. It's hard to call this tulip mania anymore... the overall price has been going almost uniformly up on bitcoin for over 4 years now.

The price of USD has gone down steadily since its inception.

I don't think you can say it's "near worthless" to keep your value in an appreciating medium rather than a depreciating one..

My bitcoins are probably not worth the $2400 they traded at today... but they are definitely worth more than the $400 of USD they used to be (now worth $376 USD2013).

401k - I agree US equities look overpriced (because of other reasons, mainly interest rates).

>I don't think you can say it's "near worthless" to keep your value in an appreciating medium rather than a depreciating one..

I'm not sure it's useful to group all cryptocurrencies together as a single medium. You should look at them individually and make your own projections. The current valuation the market is giving to 98% of coins, IMHO isn't based on anything except uneducated speculation - there is no utility function or current/potential revenue that reflects the valuation of most coins. If/when there is a correction I don't know - people might just leave their money in for a long time.

The difference is that there are fairly objective measures of value that you can apply to equities. We are probably a little overpriced right now based on P/E ratios. But unless something world shattering happens, we can be pretty confident the S&P wont be at 50% of what it is today. If for no other reason than because you actually have an ownership stake in the companies.

But is there any coherent explanation for why bitcoin should be priced at 2500 dollars rather than 2.5 dollars? or 2.5 cents?

The US dollar is a bad example because it's not supposed to be used as long term store of value at all. The inflation is purposeful and much more importantly fairly predictable. A bank can lend me 1,000,000 dollars to buy a house because they can be fairly confident that inflation is going to be ~2%.

>we can be pretty confident the S&P wont be at 50% of what it is today.

except that time the S&P dropped 57% (2007 to 2009 from 1,565.15 to 676.53)

>But is there any coherent explanation for why bitcoin should be priced at 2500 dollars rather than 2.5 dollars? or 2.5 cents?

Are you similarly skeptical about the price of gold? There is a universal need for a store of value which is not only insulated from global financial markets, but also a hedge against them. Due to mathematically certain scarcity and decentralized resistance to manipulation, crypto fulfils that need better than gold. Assuming that gold is priced primarily to fulfill this same market need, and that no gold is ever mined again, a bitcoin should be valued at $377,000.

There is no mathematically certain scarcity because you can always clone ethereum code and launch new cryptocurrency.

But this new currency wouldn't have the same support e.g. by exchange plattforms and not the same popularity.

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